(DOC) Assignment On Working Capital Management

Added on - 23 Jan 2020

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03.01 Different techniques for managing working capitalThere are many more techniques through which a company can manage the workingcapital. Vodafone is renowned telecommunication sector which puts a microscopicobservation on its working capital. There are few steps through which Vodafone maintain thecapital which is explained below:lThere would be specific restriction among the funds’ differentiation in outflow andinflow both way.lThe outlays of cash should be significant according to cash flow amount.lMaintaining agreements of bigger cash flow should be essential.lThere should be a specific reach of a line of the gross amount of cash flow inbusiness.lThe company should be honest towards the banker and should maintain a goodrelationship with the banker too.lThe excess stock should be avoided as it may tie with the flow of cash; the companyhas to observe distinctively on inventory levels.lCustomers should be offered different offers especially at the first payment time; thecustomer has to be given discount offers. The due amounts have to get from theconsumers as fast as possible.lThe company should not get hesitate to ask about the deposits to the customers.lBetter conditions have to be taken from the suppliers for regarding longer paymentcases.lLong-term assets should have to be financed which get the equal economy throughthe life of the assets.lFinancing of cash flow should be hidden from the public as well as para-publicagencies and other organizations tool.Overall the performance of Vodafone is not good as it gross profit ratio, current ratio,solvency ratio and efficiency ratio is declining. This reflects that Vodafone should takecorrective measures for managing the working capital effectively by making timely paymentto the vendors, improving the receivable process and managing the debtors effectively formaking informed financing decisions.03.02 How to analyse accounting records
Analysis of accounting records are too much important as the records for accountingare based on the financial stability of the organization. There are much more variations howthe data of accounting would be recorded for the longer period. Vodafone secures itsaccounting records so minutely that contains a long term relation with earnings which is fullof variant studies. Valuation of the assets of the company is much confidential, and it wouldvary by the enlargement of the company, as Vodafone is a company which is runningtelecommunication services since 1991 and has accounted for 26 long years. The structure ofthe capital of the company must be differentiated as well as the consequences have to bemaintained followed by it. Vodafone is an experienced telecommunication company thatmaintains every financial procedure precisely and in a much organized way. The companymust have to work on its capital and resources besides the banking options as well as assetsof its. The detailed records of cash inflow as well as outflow too, assets of the company,liabilities of the organization, due amounts which are there in the market, other liquid cashflow should have to be structured in order. The operations and financial ratios vary companytoo company like Vodafone are a renowned telecommunication company running for twenty-six years, and it has a large circle of accounts which are maintained precisely withdocumented records of cash inflow and outflow.Under this report, accounting records ofVodafone are been analysed by using the ratio analysis tool in order to make the comparisonsbetween the two years effectively and efficiently. Ratio analysis is been counted as the mostuseful tool in order to assess the financial performance of the company.Profitability ratio analysisProfitability ratio analysis20182019Gross Profit121040118723Net profit41682146039Sales revenue282471370056GP ratioGross profit / sales * 10043%32%NP ratioNet profit / sales * 10015%39%From the above, it has been interpreted that the company's profitability ratio isincrease from 15% to 39% and as a result, it shows that the firm will easily make profit and
on the other side, the gross profit ratio of the company is decreases and for that, the firm mayto develop the strategies to improve this.Liquidity ratio analysisLiquidity ratio analysis20182019Current assets102346183812Current liabilities108309542384Inventory36742Prepaid expenses174422777Current ratioCurrent assets / currentliabilities0.940.34From the above, it has been interpreted that the ideal ratio is 2:1 but as per the table,the current ratio for 2018 is 0.94 and for 2019, the current ratio is 0.33 which clearly reflectthat the ratio is less than 1 which shows that there is need to take some step in order toimprove the business condition.Solvency ratio analysisSolvency ratio analysis20182019Long-term debt57.7645.45Shareholder's equity27.6625.96Debt-equity ratioLong-term debt / shareholdersequity2.11.8From the above it has been interpreted that solvency ratio determine or measure thecompany's ability in order to meet the long term obligation and as per the table the companyhave above 20% solvency ratio then it is consider that the company is healthy. But in 2019,the company's solvency ratio is below 20% then it reflect that the company' is not workingproperly, there is a need to develop strategies for improvement.Efficiency ratioEfficiency ratio analysis20182019Cost of goods sold161431251333
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